The United States Challenges China’s Auto Case At The WTO By Lee Smith

The United States recently challenged duties imposed by China on U.S. auto exports at the World Trade Organization (“WTO”). The duties, ranging from 2 to 21.5 percent, were imposed by China after the government conducted antidumping (“AD”) and countervailing duty (“CVD”) investigations. The United States is challenging numerous aspects of China’s autos determination.

The challenged duties were imposed on U.S.-produced cars and SUVs with an engine capacity of at least 2.5 liters -- most midsize vehicles and larger. The Chinese duties cover more than 80 percent of U.S. auto exports to China and fall disproportionately on General Motors and Chrysler because of bail-out funds provided by the U.S. Government during the financial crisis. China was reportedly the fourth-largest export market for U.S. new passenger vehicles in 2011.

The United States’ new challenge comes on the heels of its WTO victory against China in the grain oriented electrical steel (“GOES”) case. In the GOES case, the United States challenged systematic problems in China’s AD and CVD investigations. The Panel in GOES determined that China acted inconsistently with its obligations by initiating a CVD investigation without sufficient evidence and by failing to comply with the “objective examination” and “positive evidence” requirements with respect to its injury analysis. The United States’ autos challenge involves some of the same issues challenged in the GOES case.

In the autos case, the United States also is challenging China’s initiation and standing analysis. In autos, the United States alleged that China “failed to examine the degree of support for, or opposition to,” the domestic Chinese producers’ petition prior to initiation. The United States also alleges that China failed to meet its WTO obligations by initiating the investigations “when domestic producers supporting the application accounted for less than 25 percent of total production of the like product” and China failed to “examine or review the accuracy and adequacy of the evidence” provided by petitioners.

These two cases demonstrate that the U.S. Government is proactively challenging measures applied by China against U.S. manufactures to ensure that U.S. manufactures receive a fair investigation in China. If the U.S. victory in the GOES investigation is upheld, China will be required to remove the duties on U.S.-produced GOES. The United States seeks to achieve a similar victory in the autos case while attempting to ensure that China does more to meet its transparency and due process commitments in future AD and CVD cases.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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